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TMI Blog2016 (6) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... case for the assessment years 2003-04 and 2004-05 wherein the similar amount of incentive received by the assessee-company under the same scheme of the West Bengal Government has been held to be capital in nature not chargeable to tax. Respectfully following the said decision of the Tribunal, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee on this issue - Decided in favour of assessee Loss of one eligible unit is required to be set off against the profit of other eligible unit for the purpose of computing deduction under 80-IA - Held that:- This issue of the Revenue's appeal for the assessment year 2006-07 is squarely covered in favour of the assessee, inter alia, by the decision of the hon'ble Delhi High Court in the case of CIT v. Dewan Kraft System P. Ltd [2007 (2) TMI 149 - DELHI HIGH COURT ] wherein held that the losses of other unit of an assessee-company not set off with the profit of another unit which is eligible for the deduction u/s 80IA - Decided in favour of assessee Disallowance under section 14A - Held that:- As regards the disallowance under section 14A on account of common and general expenses, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and the last day of the previous year, from which the exempt income was earned. Addition of the foreign travel expenses - Held that:- It is observed that after taking into consideration the nature and purpose of Tata Business Excellence Convention organised at Pattaya, a finding has been recorded by the learned Commissioner of Income-tax (Appeals) that the foreign tour undertaken by the employees of the assessee-company to participate in the said convention was for the purpose of its business and the expenditure incurred on such travel was an allowable expenditure. At the time of hearing before us, the learned Departmental representative has not been able to rebut or controvert the finding recorded by the learned Commissioner of Income-tax (Appeals) in this regard - Decided in favour of assessee - I. T. A. Nos. 956, 737/Kol/2012, 957, 738/Kol/2012, 958, 739/Kol/2012 and 959, 740/Kol/2012 - - - Dated:- 4-3-2016 - P. M. Jagtap (Accountant Member) And S. S. Viswanethra Ravi (Judicial Member) For the Petitioner : Rajat Subhra Biswas For the Respondent : Shreya Loyalka, Ashish Agarwal ORDER P. M. Jagtap (Accountant Member) 1. These eight appeals, four f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, which was captively consumed by itself. He also relied on the CBDT's instruction No. 1116 clarifying that the deduction under section 80-IA is available to captive power generating unit. The learned Commissioner of Income-tax (Appeals) also relied on the decision of the Tribunal rendered in the assessee's own case for the assessment years 2003-04 and 2004-05, vide a common order dated October 23, 2009, wherein the deduction claimed by the assessee under section 80-IA in respect of captive power plant was allowed by the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the learned representatives of both the sides, this issue involved in ground Nos. 1 and 2 of the Revenue's appeal is squarely covered in favour of the assessee, inter alia, by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 rendered, vide its order dated October 23, 2009, in I. T. A. Nos. 752 and 785/Kol/2008, wherein the similar claim of the assessee for deduction under section 80-IA in respect of captive power units has been allowed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hon'ble Calcutta High Court in the case of CIT v. Rasoi Ltd. [2011] 335 ITR 438 (Cal) wherein it was held that sales tax incentive received by the assessee under the West Bengal Incentive Scheme for expansion of capacity, modernisation and improving the marketing capabilities to tide over the crisis for promotion of industry in the State was capital in nature. The learned Commissioner of Income-tax (Appeals) also relied on the decision of the Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 rendered, vide its order dated October 23, 2009, wherein a similar issue was decided by the Tribunal in favour of the assessee. 8. We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the representatives of both the sides, this issue involved in grounds Nos. 3 and 4 of the Revenue's appeal is squarely covered in favour of the assessee, inter alia, by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 rendered, vide its order dated October 23, 2009 (supra), wherein the similar amount of incentive receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Exide Industries Ltd., the Tribunal restored the same to the file of the Assessing Officer with a direction to await till the final decision of the hon'ble Supreme Court on the issue and then to decide the issue accordingly. Following the said decision of the co-ordinate Bench, we restore this issue to the file of the Assessing Officer with the similar direction. The appeal of the assessee on this issue is accordingly treated as allowed for statistical purposes. 12. Now, we take up the cross appeals for the assessment year 2006-07 being I. T. A. No. 738/Kol/2012 (assessee's appeal) and I. T. A. No. 957/Kol/ 2012 (Revenue's appeal), which are directed against the order of the learned Commissioner of Income-tax (Appeals)-I, dated March 1, 2012. 13. As regards grounds Nos. 1 and 2 raised by the Revenue in its appeal for the assessment year 2006-07, it is observed that the issue involved therein relating to the assessee's claim for deduction under section 80-IA in respect of its captive power units is similar to the one involved in grounds Nos. 1 and 2 of the Revenue's appeal for the assessment year 2005-06, which has already been decided by us in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeals) in favour of the assessee in the assessee's own case for the assessment years 2005-06, 2007-08 and 2008- 09 and the Department has accepted the same by not raising this issue in the appeals filed before the Tribunal for the said years. Following the decision of the hon'ble Delhi High Court in the case of Dewan Kraft System P. Ltd. [2008] 297 ITR 305 (Delhi) and keeping in view the principle of consistency, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee on this issue and dismiss ground No. 3. 17. Ground No. 4 of the Revenue's appeal and ground No. 2 of the assessee's appeal for the assessment year 2006-07 involve a common issue relating to the disallowance under section 14A. 18. During the year under consideration, i.e., the assessment year 2006-07, the assessee-company had received dividend income of ₹ 34,75,409 on the investment of ₹ 4 crores made in the shares of Rallies India Ltd. and the same was claimed to be exempt from tax. No disallowance on account of expenses incurred in relation to the earning of said exempt income, however, was made by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the same. As regards the disallowance under section 14A on account of common and general expenses, it is observed that the co-ordinate Bench of this Tribunal has taken a consistent stand on this issue in several cases by holding that a disallowance to the extent of 1 per cent. of the exempt income would be fair and reasonable. Since the learned Commissioner of Income-tax (Appeals) in his impugned order has followed this stand consistently taken by the Tribunal while restricting the disallowance under section 14A on account of common and general expenses to 1 per cent. of the exempt income, we find no infirmity in the same. Accordingly, the impugned order of the learned Commissioner of Income-tax (Appeals) restricting the disallowance made by the Assessing Officer under section 14A to ₹ 34,750 is upheld thereby dismissing ground No. 4 of the Revenue's appeal and ground No. 2 of the assessee's appeal. 20. As regards the ground No. 1 of the assessee's appeal for the assessment year 2006-07, it is observed that the issue involved therein relating to the assessee's claim for deduction on account of leave encashment of ₹ 17,94,000 on provision basis is si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the Assessing Officer to delete the addition of ₹ 6,43,924 made to the book profit computed under section 115JB of the Act on account of disallowance of expenses incurred by the assessee in relation to the earning of exempt income under section 14A. 25. While computing the book profit under section 115JB for the year under consideration, i.e., the assessment year 2007-08, no disallowance on account of expenses incurred for earning of exempt income was made by the assessee. Relying on Explanation 1(f) to section 115JB, the amount of disallowance as worked out by him under section 14A while computing the income of the assessee under the normal provisions was added by the Assessing Officer while computing the book profit of the assessee under section 115JB. Although the disallowance so made under section 14A amounting to ₹ 6,43,924 while computing the income of the assessee under the normal provisions of the Act was restricted by the learned Commissioner of Income-tax (Appeals) to ₹ 30,000, he held that the amount of disallowance so sustained, however, could not be added while computing the book profit of the assessee-company under section 115JB as the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ore for a period of ten years. In the return of income filed for the year under consideration, the amount of ₹ 3,50,00,000 incurred on railway sidings was claimed by the assessee as deduction being revenue expenditure by placing reliance, inter alia, on the decision of the hon'ble Supreme Court in the case of CIT v. Associated Cement Companies Ltd. [1988] 172 ITR 257 (SC). This claim of the assessee was not found acceptable by the Assessing Officer. According to him, the expenditure of ₹ 3.50 crores incurred by the assessee was going to give enduring benefit of ten years. Accordingly, he allowed the expenditure in question incurred by the assessee on railway sidings only to the extent of one-tenth, i.e., ₹ 35,00,000 and disallowed the balance amount of ₹ 3.15 crores. On appeal, the learned Commissioner of Income-tax (Appeals) deleted the disallowance made by the Assessing Officer on this issue by relying on the decision of the hon'ble Supreme Court in the case of Associated Cement Companies Ltd. (supra), wherein it was held that the expenditure incurred by the assessee towards installing water pipe lines and accessories outside the factory premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's appeal is accordingly treated as allowed for statistical purposes. 31. Now, we shall take up the cross appeals for the assessment year 2008-09 being I. T. A. No. 740/Kol/2012 (assessee's appeal) and I. T. A. No. 959/Kol/ 2012 (Revenue's appeal), which are directed against the order of the learned Commissioner of Income-tax (Appeals)-1 dated March 1, 2012. 32. As regards grounds Nos. 1, 2 and 3 raised by the Revenue in its appeal for the assessment year 2008-09, it is observed that the issue involved therein relating to the assessee's claim for deduction under section 80-IA is relation of captive power units is similar to the issue involved in ground No. 1 of the Revenue's appeal for the assessment year 2005-06, which has already been decided by us in the foregoing portion of this order allowed by the Tribunal relying on the various judicial pronouncements as well as following our conclusion drawn the said decision on a similar issue in the assessment year 2005-06, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) allowing the claim of the assessee for deduction under section 80-IA in respect of the captive power units an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. The limited contention raised by her is that while computing such disallowance, investment which yielded dividend income during the year under consideration only should be considered. Since this contention of the learned counsel for the assessee is duly supported by the decision of the co-ordinate Bench of this Tribunal in the case of REI Agro Ltd. v. Deputy CIT reported in [2013] 144 ITD 141, we modify the impugned order of the learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to compute the disallowance to be made under rule 8D(2)(iii) by taking into consideration the average value of that investment appearing in the balance-sheet as on the first and the last day of the previous year, from which the exempt income was earned. Grounds Nos. 4 and 5 of the Revenue's appeal are accordingly dismissed, while ground No. 2 of the assessee's appeal is partly allowed. 36. As regards grounds Nos. 6 and 7 of the Revenue's appeal for the assessment year 2008-09, it is observed that the issue involved relating to the sales tax incentive subsidy is similar to the one involved in grounds Nos. 3 and 4 in the appeal of the Revenue for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure incurred on such travel was an allowable expenditure. At the time of hearing before us, the learned Departmental representative has not been able to rebut or controvert the finding recorded by the learned Commissioner of Income-tax (Appeals) in this regard and this being so as well as keeping in view the reasons given by the learned Commissioner of Income-tax (Appeals) in his impugned order, we find no justifiable reason to interfere with the impugned order of the learned Commissioner of Income-tax (Appeals) allowing relief to the assessee on this issue. The same is accordingly upheld dismissing ground No. 8 of the Revenue's appeal. 40. As regards ground No. 1 raised in the appeal of the assessee for the assessment year 2008-09, it is observed that the issue involved therein relating to the assessee's claim for deduction of ₹ 41,85,000 on account of leave encashment on provision basis is similar to the one involved in ground No. 1 of the assessee's appeal for the assessment year 2005-06, which has already been decided by us in the foregoing portion of this order. Following our conclusion drawn in the assessment year 2005-06, we restore this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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